10-K: International Paper Completes DS Smith Acquisition, Reports Full-Year 2024 Results

International Paper finalizes its business combination with DS Smith, while reporting a net earnings increase for 2024 compared to the previous year.

Summary

• International Paper's full-year 2024 net earnings attributable to shareholders were $557 million, or $1.57 per diluted share, compared to $288 million, or $0.82 per diluted share, in 2023.
• In April 2024, International Paper announced a proposed business combination with DS Smith Plc, which was overwhelmingly approved by shareholders in October 2024 and closed on January 31, 2025.
• As part of the European Commission's clearance of the DS Smith business combination, International Paper plans to divest plants located in Mortagne, Saint-Amand, and Cabourg (France), Ovar (Portugal) and Bilbao (Spain).
• The company is implementing an 80/20 strategic approach to drive transformational performance, focusing on being the lowest-cost producer and most reliable sustainable packaging solutions provider.
• Capital spending in 2024 was approximately $921 million and is expected to be approximately $1.2 billion in 2025.
• As of December 31, 2024, International Paper had approximately 37,000 employees, with nearly 31,000 located in the United States.
• The company invested approximately $17 million in 2024 to address critical needs in the communities in which it operates.
• The company is targeting incremental reductions of 35% in Scope 1, 2, and 3 GHG emissions by 2030 in comparison to 2019 levels.
• The aggregate market value of the Company’s outstanding common stock held by non-affiliates as of June 30, 2024 was approximately $14,910,126,297.
• The number of shares outstanding of the Company’s common stock as of February 14, 2025 was 526,125,614.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook, highlighting increased earnings and strategic acquisitions, but also acknowledges ongoing challenges and risks.

Positives

• Net earnings increased significantly in 2024 compared to 2023.
• The DS Smith acquisition is expected to create a global leader in sustainable packaging solutions.
• The 80/20 strategic approach is expected to drive transformational performance and profitable market share growth.
• The company is committed to reducing its environmental impact through its Vision 2030 goals.
• The company maintains a strong liquidity position, supported by credit facilities.

Negatives

• The company plans to close the containerboard mill in Campti, Louisiana with operations expected to cease by March 31, 2025.
• Mill reliability was an issue in 2024 resulting in elevated costs throughout the year.
• The company is subject to a wide variety of laws, regulations and other government requirements that may change in significant ways, and the cost of compliance, or the failure to comply with such requirements, could impact our business and results of operations.

Risks

• Failure to successfully integrate DS Smith and realize the anticipated benefits and operating synergies.
• Fluctuations in the prices of and the demand for our products due to economic cyclicality and changes in customer or consumer preferences.
• Changes in the cost and availability of raw materials, energy and transportation.
• Competition and downward pricing pressure in the global packaging industry.
• Risks associated with climate change and other sustainability matters.
• Cybersecurity and information technology risks.
• Material disruptions at one of our manufacturing facilities.
• Failure to attract and retain qualified personnel.
• Inability to realize the expected benefits and cost savings associated with restructuring initiatives.
• Results of legal proceedings could have a material effect on our consolidated financial results.

Future Outlook

The company anticipates earnings will continue the stabilization trend seen in the fourth quarter of 2024, with earnings expected to progressively ramp up as commercial contract restructuring is completed and 80/20 initiatives deliver value.

Management Comments

• In 2024, we initiated our strategy to deliver profitable growth as the low-cost, most reliable and innovative sustainable packaging solutions provider for our customers.
• Our earnings stabilized in the fourth quarter 2024 and we intend to accelerate earnings improvement in 2025.
• We believe 2025 will be a transformational year.
• We are confident we have developed the right strategy and a concrete plan that will deliver customer excellence and drive profitable growth.
• We believe our actions will drive transformational improvements and create significant value for our shareholders.

Industry Context

The pulp and packaging sectors are large and fragmented, and the areas into which we sell our principal products are very competitive.

Comparison to Industry Standards

• The companies included in the Peer Group are DS Smith PLC, Klabin S.A., Mondi Group, Packaging Corporation of America, and Stora Enso Group.
• Returns are calculated in $USD.

Management Changes

Corporate Governance

Legal Proceedings

• The Company (through both International Paper and our newly acquired DS Smith subsidiaries operating in Italy) are among a number of companies operating in the paper packaging industry subject to a decision by the Italian Competition Authority concerning anti-competitive behavior in Italy.
• We are further subject to a number of actual and threatened claims for compensation arising out of or relating to the decision by the Italian Competition Authority.
• The Company is a PRP with respect to the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund Site in Michigan.
• International Paper and McGinnis Industrial Maintenance Corporation ('MIMC'), a subsidiary of Waste Management, Inc. ('WMI'), are PRPs at the San Jacinto River Waste Pits Superfund Site in Harris County, Texas.
• The Company is a responsible party for the investigation and remediation of Versailles Pond, a 57-acre dammed river impoundment that historically received paperboard mill wastewater in Sprague, Connecticut.
• We have been named as a defendant in various asbestos-related personal injury litigation, in both state and federal court, primarily in relation to the prior operations of certain companies previously acquired by the Company.

Stakeholder Impact

• The business combination is designed to create a truly sustainable packaging solutions leader that can serve a broad set of customers across a wide range of attractive and growing end-markets to generate significant shareholder value.
• The Company is focused on promoting a culture that leverages the talents of all employees, and implementing practices that attract, recruit and retain a broad array of talent.
• We encourage our employees to support the communities in which they live and in which the Company operates.
• The Company delivers dependable and sustainable packaging solutions that protect and transport foods to our community and customers.

Next Steps

• Continue to improve the reliability at our mills and optimize our mill and box system so that we are able to reduce structural costs.
• Continue to build a performance-driven and customer-centric culture.
• Continue to implement restructuring initiatives.
• Continue to evaluate and implement projects as we pursue this Vision 2030 GHG goal.

Key Dates

Keywords

International Paper, DS Smith, packaging, cellulose fibers, acquisition, sustainability, financial results, restructuring, capital spending, emissions, risk factors